You CAN Survive a Stock Market Crash
Image by jtyerse via Flickr
Even though things have been a bit volatile on the stock market, that’s no reason to give into fear. Instead, consider that cycles are common. There are periods of growth and recession in the economy, and there are ups and downs on the stock market. Over time, though, the bumps smooth out and gains are to be head. While it is possible that the long term market (20-25 years) could lose, it hasn’t happened yet. When a stock market crash comes, it is important to take a deep breath and try to analyze the situation in as calm a manner as possible.
First of all, it is important to look over what you have. If the fundamentals of your investments haven’t changed, there is very little that you need to change. For stocks, you should consider that they are likely to gain in the future, and that right now, sticking with your investment plan, you can get them “on sale.”
Another thing you should do is continue to fund your retirement accounts. Jeff Rose, CFP, points this out in Good Financial Cents:
Just because I’m suggesting to fund your retirement accounts doesn’t mean you have to put in all in the market. You will want to at least fund your retirement accounts to either get the 401k match or the tax free savings of the Roth. Even if it’s invested into bonds right now, you’ll be able to transition to stocks later on when you feel more comfortable.
Rose also suggests diversification. You want to make sure that you are appropriately diversified in your investments, and that you have additional asset classes beyond stocks and bonds that can help protect your portfolio against huge losses — and help it recover faster.
In the end, it’s all about a measured approach. Review your investment plan, and determine whether, in essentials, it is still sound. If it is, continue business as usual until the economy and the market recover.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
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